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Income Drawdown

Income drawdown (or pension drawdown) is an alternative to an annuity as a way of turning your pension fund into regular income. Rather than buying a fixed income, a drawdown allows you to simply withdraw money from your contract.

 

Income Drawdown ExplainedAssurance

A drawdown enables you to make withdrawals from your pension fund while keeping the rest invested, allowing it to continue to grow, free from income tax and capital gains tax.

You must be over 55, and can take your income drawdown when you retire, or semi-retire and use it to supplement your income.

Usually, a minimum of £50,000 investment is needed to begin a drawdown. In the right circumstances, it is possible to take both an annuity and a drawdown.

Drawdown, Annuity or Both?

There is no longer a requirement to buy an annuity at any age, meaning you can put off buying an annuity until market health improves, or until you are older, pushing annuity rates higher.

You could even continue in drawdown for your lifetime. You can now leave money in a registered pension scheme as unused funds until they are needed and, in some cases, delay taking your pension until after age 75. Money can be withdrawn after age 75 in a variety of 'lump sum' options.

Considerations when thinking about an income drawdown versus an annuity or other investment options (or a combination) include current market health, your personal health, and the amount of money in your pension pot.

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Flexi-Access Drawdown

Flexi-access drawdown was introduced as an option from 6 April 2015.

You can choose to go into flexi-access drawdown, normally from the age of 55, there are some exceptions, as an alternative to purchasing an annuity, or taking an uncrystallised funds lump sum.

Rules do vary from scheme to scheme - your adviser will discuss the conditions attached to your scheme with you.

Usually you will able to withdraw up to 25%, in some cases you will be allowed to withdraw more where lump sum protection applies, with the balance going into flexi-access drawdown.

You choose the funds to invest in your pension plan, that match your income objectives and attitude to risk, and set the income you want. How do we assess your attitude to risk? >more

If you draw down regular income from your pension the income will be taxed at your marginal rate. A money-purchase annual allowance (MPAA) is triggered when you receive the first flexi-access drawdown income payment from your drawdown fund.

If, however, you take a tax-free lump sum and no income then this won’t trigger the MPAA.

You can, at any time, use all or part of the funds in your income drawdown to buy an annuity, or other type of retirement income product, that might offer more guarantees about growth and/or income.

Seek Advice

It's important to note that income drawdowns are complex and ever-changing. The best course of action if this is something you are considering, is to get in touch for a free consultation with one of our independent financial advisers.

Speaking to an independent financial adviser is the best way to weigh up your options without pressure from sales teams – we will always serve your best interests.

Contact our Pension Drawdown Advisers to arrange an appointmentTimeMgt

For free initial income drawdown advice from our experienced financial advisers, contact us on 0141 272 0000 or fill out our online enquiry form.

It's important to note that income drawdowns are complex and ever-changing. The best course of action if this is something you are considering, is to get in touch for a free consultation with one of our independent financial advisers.